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AmInvestment ups Yinson shares' fair value to RM5.51 from RM4.72

KUALA LUMPUR (June 14): AmInvestment Bank is retaining its buy call on Yinson Holdings Bhd and raised its fair value to RM5.51 from RM4.72 after the group said it is in talks with a Nigerian firm to supply a floating production storage and offloading (FPSO) unit.

Yinson announced earlier today that its subsidiary, Yinson Operations & Production West Africa, had entered into a heads of terms with Nigeria's First Exploration & Petroleum Development Company Ltd (First E&P) to negotiate the potential supply and charter of the FPSO.

Boosted by the news, shares of Yinson rose nine sen or 1.94% to RM4.74, giving a market capitalisation of RM5.15 billion.

"The higher SOP stems from the additional net present value (NPV) of RM860 million or 79 sen a share arising from the likely award of a 100% equity interest in the time charter of a FPSO in the Anyala and Madu fields under Oil Mining Leases (OML) 83 and 85 respectively, offshore Nigeria," said AmInvestment Bank analyst Alex Goh.

"Assuming a project IRR of 14%, project financing of 70:30 for debt to equity, we estimate that this new FPSO charter could raise financial year ending Jan 31, 2021 (FY21F) earnings by 29%. For now, we maintain our forecasts pending first oil completion," Goh said in a note.

Goh noted that Yinson's first FPSO in Nigeria, FPSO Adoon, is currently operating in the Antan field and likely to be extended after its service term expired in October given the field's good production profile.

Yinson's management earlier indicated that the group is eyeing FPSO charters from Brazil, Mexico and West Africa which are up for tender.

"Given the relatively small value of the Anyala and Madu FPSO versus the US$1 billion CapEx for the Ghana-based John Agyekum Kufuor vessel, we would not be surprised if the group is still looking for additional projects," said Goh.

"Unlike in the past three years, there is now a significantly lower number of operators with the financial capability to handle these projects given the industry downturn. The main players are Modec, SBM Offshore (which has been barred from Brazil due to ongoing bribery charges) and local rival Bumi Armada, who may only be able to manage up to two large FPSOs at a time," God added.

Yinson shares currently trade at a bargain calendar year 2019 forecast price-earning (PE) of 16 times versus over 20 times for Dialog Group Bhd and Sapura Energy Bhd.